Gold Bullion & Metals Sustain Rally on China & ECB Prospects
Gold Bullion Prices continue the upside rally & Gold futures for October delivery were seen trading at $1697 close to the $1702 resistance & Silver for December delivery was up 2.62% and trading at $ 32.35. I do not rule out a small correction in the coming days before Silver & Gold Bullion prepare to breakout for higher lofty targets. The commercial short positions in Silver & Gold Bullion would need to be reduced to enhance the chances of a further robust & a sustained rally. As of now, Gold Bullion markets seem to have interpreted the Fed’s Friday speech as growing increasingly ready to roll out a third round of quantitative easing.
The much looked forward to August US jobs report on Friday may be crucial in helping the Fed in making up the QE3 decision, also after the ECB Policy Meet & European courts decisions are heard. European verbal intervention has run its course, and real monetary intervention is a mathematical certainty. The US QE3 may soon be a reality with the Fed’s belief that unemployment could be controlled with more monetary infusions & the US fiscal cliff returning to the political forefront.
Gold Bullion Demand from China Central Bank may keep Gold Prices Strong:
There is speculation that China’s central bank is planning to buy at least 5,000 to 6,000 metric tons of Gold Bullion over the next two years and it will start purchasing that Gold Bullion this year. Keep in mind that the average production of Gold Bullion mines is about 2,602 metric tons per year, according to World Gold Council. A simple calculation would show that, if the central bank of China is planning to buy 5,000 to 6,000 tons of Gold Bullion and the total Gold Bullion production of the mines is 2,602 tons per year, this suggests that the Chinese central bank will be buying more than a two years’ supply of Gold Bullion produced.
China’s appetite for Gold Bullion is as strong as ever. In the first two quarters of 2012, China’s inflow of Gold Bullion from Hong Kong increased six times! In addition, the imports of Gold Bullion from Hong Kong were higher by 65% in April, compared to March. – Mineweb reported, August 9, 2012. More evidence of China adding to its Gold Bullion reserve: China National Gold; a state-owned miner, is looking at buying Barrick Gold Corporation’s (NYSE/ABX) interest in a major African Gold mine. This would be the biggest Gold Bullion deal that China National Gold has ever done. – Reuters reported on, August 17, 2012.
The expected Gold Bullion purchases by China were reported by us earlier on August 13. Read- China Gold Bullion Demand on Expected devaluation of the US Dollar, in the Article : China Economy demands Action. Urged to increase Gold Bullion Reserves
Slide in China’s Economic Growth – The World’s second-biggest Economy, is deepening:
An HSBC purchasing managers’ index released on Monday fell to 47.6 in August, its lowest reading since March 2009 and a similar survey by the National Bureau of Statistics on Saturday showed the manufacturing sector shrinking for the first time since November. Still, the HSBC PMI adds to other figures that suggest the economy is revisiting 2009. Industrial output growth in July rose at its weakest pace since 2009 and exports were rising at their lowest trajectory since that year, excluding a fall in January. The Shanghai stock market has slumped almost 18% from this year’s highs to levels last seen in March 2009.
Second-quarter 2012 GDP figures, the latest available, showed economic growth running at its slowest pace since the first quarter of 2009, reflecting domestic property market curbs and weak exports demand from Europe where fears of a recession are mounting. In March 2009, the Chinese economy was recovering from a far worse crisis, in part thanks to a huge 4 trillion yuan ($630 billion) stimulus package put in place by Beijing. Growth in the March quarter of 2009 hit 6.1%. Second quarter growth this year is the lowest since then but was still much higher at 7.6%. Still, the picture today is of an economy slipping into a deeper-than-expected slowdown, in part thanks to the consequences of the stimulus package, which fired up inflation and the real estate market, reported Reuters. Central government curbs on real estate to calm prices and support a policy of affordable housing have combined with the impact of the European debt crisis on global demand to drag China’s economic growth down. “The current slowdown is caused by both cyclical and structural factors,” said Zhu Baoliang, chief economist at top government think-tank State Information Centre, adding that further monetary easing would do little to counter the slowdown. If history is any measure, it suggests growth will ease again in the third quarter and start to rebound in the fourth quarter. China’s two interest rate cuts this year and liquidity injections into the market via large-scale reverse repos have not had substantial effect as many data show China’s economic growth momentum is clearly decelerating. China may not be solely focused on the economy due to a once-a-decade wholesale leadership swap happening in the next couple of months.
Copper, Lead rise on stimulus prospects after gloomy China data:
Earlier data showed that a contraction in factory sector activity in China, the world’s top Copper consumer, intensified in August as both output and new orders dropped while manufacturers cut prices to compete for business. China PMI was weaker than expected but all that’s done as with other data in the U.S. and elsewhere is to stoke more hopes of stimulus or easing, that’s why commodities and metals are still hogging the recent highs. It’s not a good foundation for sustainable increases, it means commodities can rally but that rally will attract speculative selling. Copper prices have edged into positive territory for the year, but are still down by some 13% from the year’s peaks hit in February. Metals seem to be drawing support from expectations the European Central Bank will take bold steps at its Thursday meeting to stem the debt crisis. A stronger euro makes dollar-priced metals cheaper for European investors. Markets are also expecting the ECB to release details of its new bond-buying plan to ease the region’s debt crisis, which many central banks say is the prime cause of the global slowdown in economic activity. China still has plenty of scope to take fiscal policy and monetary measures. Base Metals should therefore be able to continue their upswing in the coming weeks and months. LME lead prices have also been supported by recent draw downs from LME stocks. LME stocks have dropped by almost a third over the past two weeks, and this could trigger a spike in short-term prices in September, traders and warehouse officials said. Available stocks in LME-registered warehouses have slumped by around 92,000 tonnes, or 32%, since August 13, and half of those draw downs are due for delivery out of Singapore, draining the port of all but 1,725 tonnes of metal. On Saturday Sept. 9, several Chinese Economic Data releases like inflation data, industrial production, trade balance and retail sales are expected.
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